Traditionally it’s harder to get a lender to grant you a self-employed mortgage because of the possibly unsettled frequency of your income. However with the huge increases self-employed numbers, both relative and absolute, lenders are starting to be more flexible in their approach.

However there are certain things you can do to put your best foot forward, which this article expands upon, offering 5 essential tips for securing a self-employed mortgage so you can get your conveyancing process underway and end up with your own house keys.

1 Get that critical first year under your belt before you apply

If you’re newly self-employed, you’ll need at least to get one year of trading under your belt before most lenders will even consider your application. They’ll need to be convinced that your business is viable and resilient, and nothing illustrates this more than staying in business, given the number of business failures which occur in the first year.

After the first year, more lenders might consider passing your application to their underwriters for risk assessment and when you reach the 3-year mark, your business will generally be regarded as stable by most banks where granting a mortgage is concerned.

2 Check your credit score

Your credit score and report is one of the preliminary matters which all lenders consider when examining your mortgage application.

If you’ve previously been a mortgagor and have managed to make all your repayments, all other things being equal you can reasonably assume that your credit score will be good and you’re more likely to be successful in a future mortgage application.

But if you’re a first time buyer and you haven’t used credit much, you might not have a sufficiently developed credit history to generate a good score. Regardless, you need to know how any of the main 3 credit reference agencies view you as a credit risk, and if the score is too low, you should take measures to build it up. Typically you should take on some small, controllable debt and ensure that you make the required repayments for it on time – each time you make a timely repayment, your credit score will increase.

3 Examine offset mortgages as an option

Offset mortgages commonly involve you having a savings account with the lender you’ve received a mortgage from. Any interest you generate from your savings can be used against – i.e. can be offset against – your mortgage interest.

This can work very well because you may be putting aside cash every month towards, for example, your yearly tax bill and it’s a good way of hedging your lifestyle in the face of an unpredictable income stream.

The flip side, however, can be the interest rates on these products which may be higher than for others.

4 Instruct a mortgage broker

When you instruct an independent mortgage broker to act for you, they can find the right self-employed mortgage for your requirements out of a bewildering number of products on the market – easily more than 10,000.

An additional advantage is that they can help you with your mortgage application.

5 Start collecting together all your accounts

You’re putting your best foot forward if you collect together all your accounts prior to making a self-employed mortgage application.

As stated above, you should have a minimum of one years’ accounts but you give yourself more chance the further you can get towards 3 years’ worth.

Self-employed applicants for mortgages are on the rise and lenders are starting to recognise this and to tailor products geared at them. It still remains a challenge, but one which you are more likely to overcome the more preparation you do beforehand.

 

Marcus Simpson

Editor

SAM Conveyancing

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